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16 years of GSM in Nigeria

August 2017 makes it precisely 16 years since the Global System for Mobile, GSM, genre of communication was introduced into the Nigerian market. GSM in itself is not a new technology. It debuted in 1982 as a pan-European communication technology and had since spread beyond the frontiers of Europe to other jurisdictions including Africa. Nigeria, therefore, came late to the party.

The good news, however, is that though a late entrant into the GSM market, Nigeria has outpaced many countries across the globe in terms of market size and telephone penetration. The first GSM service rolled out in August 2001 following a successful Digital Mobile Licence, DML, auction conducted in January of the same year by the nation’s telecom regulator, the Nigerian Communications Commission, NCC. That auction, the first in Africa, was adjudged transparent and world-class by both the World Bank and the International Telecommunications Union (ITU). The NCC had placed the asking price for each licence at a conservative $100 million. But at the end of the auction, each licensee paid as high as $285 million.

That exercise spurred what is today called ‘telecom revolution’. And it is a revolution when we compare certain indices. Prior to 2001, Nigeria could only boast of about 425,000 phone lines, mostly analogue. The country was then ranked among Afghanistan and other war-ravaged and economically strangled nations in terms of telecom development. Within the past 16 years, the number of active phone lines in the country has risen to over 150 million.

Also within the period, over thousands of well-paying career jobs were created with hundreds of thousands of ancillary jobs and countless economies of scale including the sprouting of GSM cum ICT markets across the country. GSM has not only created jobs, it has created wealth and empowered many homes. In 16 years, the telecom industry has grown from a $50 million sector in investments to over $68 billion. Within this period, it has raked into the Federation Account over N15 trillion, birthed a new socio-economic order in the manner Nigerians live and work, ramped up the nation’s profile and stature on the global stage and added new dynamics of transparency in governance, both in the private and public sector.

Whether we plot the graph or capture it in charts, the story of Nigeria telecom is one of astute resilience, pacy growth and quantum return on investment. It is the classical grain of mustard seed which has grown into a lush verdant of trees.

This is not another eulogy to mark a milestone; it is a statement of fact that telecom is the only sector in the nation’s economic ecosystem which has continued to outperform its equivalent in other jurisdictions including in economies of more advanced nations across the globe. The global stats say so. Nigeria currently ranks among the top five fastest growing telecom markets in the world. It shares the same podium with India, China and other top economies on this. At a time, Nigeria was the fastest growing mobile market in the world; this honour she had for five consecutive years. In a space of 16 years, tele-density has grown from less than 1% to an overwhelming 108%. Contribution to GDP has surged over time to nearly 10%.

Nigeria telecom has bolted from the stacks of inertia unlike other sectors. In a season of recession which made other sectors of the economy to slide and steep, telecom bucked the trend. It remained resolute and resilient against centrifugal headwinds. It is a huge positive for the President Muhammadu Buhari government that at a time the national economy dipped south, telecom stayed up north with pleasant ensigns of a beautiful tomorrow. Besides, it has remained attractive for investors. Many reasons account for this: Largest population (market) in Africa, growing middle class (workforce) of 23% of population, 37% youth population within the age bracket of 15-35 years, a vast field for broadband services opportunity, growing e-commerce, e-banking, etcetera and a lifestyle that encourages communication (both voice and data); there is still more room for investors.

The International Telecommunications Union (ITU), the UN body in charge of telecom, has consistently attributed the success in Nigeria telecom to regulatory excellence. The ITU has severally made reference to Nigeria as a model for other nations. The lesson in this narrative is that the solution to our various challenges as a nation can be found within us. All the regulators who have kept Nigeria telecom at the cutting edge are Nigerians, not foreigners or expatriates as we prefer to address them.

From Ernest Ndukwe to Dr. Eugene Juwah and now Professor Umar Danbatta, these men, all engineers, have proven that there is strength and excellence in local content. The incumbent EVC of the Commission, Professor Umar Danbatta, has not only continued in the tradition of regulatory excellence, he has so far demonstrated that the NCC is willing and ready to position Nigerian telecom as the undisputed enabler of productivity for other sectors.

Professor Danbatta whose appointment has been largely described as one of the best and most pertinent appointments by President Buhari launched an eight-point agenda for Nigeria telecom. The agenda is embedded in a five-year plan which targets primarily a pervasive rollout of broadband services across the nation as a way of addressing the knotty issue of quality of service.

Danbatta sure knows his way around the sector. An accomplished Professor of Electronics Engineering and alumnus of the University of Manchester, he was in his element recently when the commission presented a Code of Corporate Governance for the sector. Danbatta’s roadmap is clear; carefully crafted and conceptualised to fit into the vision and goals of the government of President Muhammadu Buhari: to create jobs, wealth and widen the revenue base of the economy as a buffer against reduced crude oil receipts while maintaining a high degree of fiscal prudence and good corporate governance among the operators and the regulator.

The introduction of the Code, which became mandatory in November last year, is a further demonstration of the commitment of the regulator to sustain the growth gradient in the sector as well as build a safety valve against administrative atrophy and corporate mortality in the sector arising from bad leadership and opaque fiscal management.

The Nigerian GSM story is a fitting illustration of our ability to govern and govern well; it indexes a nation’s resolve to stay up against a mountain of odds. As we mark 16 years of GSM, it is also apposite to commend the likes of Econet Wireless (now Airtel), MTN, Globacom (the unabashedly pan-Nigerian network with global reach) and Etisalat (now 9Mobile). These entities invested in the Nigerian telecom market at a time global investors’ confidence in the market was almost zero. Recall that Vodafone of the UK was once offered a nationwide GSM licence for a symbolic one dollar and a five-year tax holiday by the Nasir el-Rufai-led Bureau for Public Enterprises (BPE). Vodafone turned down the offer because, according to them, the size of Nigeria’s GSM market was a mere 5 million subscribers in 3 years. But they were wrong. It is on this score that I commend the audacity and presence of mind of the GSM operators in the country who saw an oasis of opportunity in a place where a global heavyweight like Vodafone saw nothing but a drop of water.

Yes, we do have issues of quality of service among others but they do not in any way blight the brilliant radiance of the success story of Nigeria telecom especially at this time when GSM is 16 years old on our shores. Overall, our telecom cup is not half empty; it’s half full. That’s why we should celebrate.

Editor's Corner

This is not a case of blowing one’s trumpet. But we are persuaded to state the fact with figures and incontrovertible statistics from no less a body than the National Bureau of Statistics (NBS). The verdict? The Nigerian Communications Commission (NCC) under Professor Umar Danbatta has performed creditably. At a time the overall national economy was hurtling down the slope, telecom stayed up, maintaining a bullish run amid a torrent of economic recession that swamped the nation.

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In this edition, we have carefully choreographed with facts and figures the sterling and resilient performance of Nigeria’s telecoms sector during the nation’s most challenging period hallmarked by general economic downturn, investor apathy and marketplace turbulence.

Analysts, from Bloomberg to stakeholders, projected that if Nigeria were to exit recession fast, it would be down to the elasticity of the telecom sector which is the undisputed enabler of other sectors. And it was so. Kudos must go Professor Danbatta for his legendary “regulatory flexibility”.

Also in this edition, we serve you sights and scenes from the birthday outing of the Commission’s Board Chairman, Senator Olabiyi Durojaiye, who turned 85 in February. Described as an “exemplary leader” by President Muhammadu Buhari, GCFR, here is wishing our Chairman many blessed years to come.

This edition is a herald and it opens the window to what consumers and other stakeholders should expect this year. Besides, it chronicles with evidence the dynamism and brilliant performance of the sector for which all the stakeholders deserve commendation.

Come ride with us on a journey in performance.

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Quarterly Highlight

Mergers and acquisitions (M&A) activity in the technology and telecommunication sectors in Africa and the Middle East will more than quadruple in 2018, from 2017. This is according to Baker McKenzie’s Global Transaction Forecast, developed in association with Oxford Economics. The report shows that M&A in the tech and telecoms sector in Africa and the Middle East was valued at US$1 .2 billion in 2017. This is predicted to increase to US$5.9 billion in 2018 and a further US$5.9 billion in 2019, before decreasing to US$3.9 billion in 2020.

The report notes that a more positive global economic outlook, the expansion of technology across industries, investment from emerging markets, and strong corporate balance sheets are the key factors in driving investment in tech M&A around the world, including in Africa.

Darryl Bernstein, Head of the Technology, Media and Telecommunications (TMT) Practice at Baker McKenzie in Johannesburg, South Africa, explains the predicted rise in tech and telecoms M&A in Africa, “Africa’s growing telecoms infrastructure and access to online services and platforms continue to improve access to the online economy. Increased local demand for innovative products, services and solutions drives offshore telecommunications and technology companies to target opportunities in Africa. The growing financial services sector has also seen domestic banks make significant investments in technology to advance their innovation agenda. African tech companies are also targeting offshore investments in companies that will deepen their access to new technologies, markets and talent.”

“The expansion of emerging technologies across industries, including agribusiness, automotive and of course fintech, will also drive M&A activity as we expect to see more cross-sector deals involving technology,” says Bernstein ....